Non-fungible tokens have been on the market for a long time. They have become a buzzword when we talk about the blockchain.  However, for many people, NFTs are very difficult to understand.

What are NFTs?

An NFT is a digital asset which represents a real world product, thing or cameo.   Most people know NFTs which are associated with music, pieces of art, videos, minerals and real estate. Like cryptocurrencies NFTs are purchased and sold online.  In other words NFTs are tokenized real world objects, physical features or snapshots of events.  

What is the difference between NFTs and cryptocurrencies?

Basically, NFTS are created using the same kind of programming as cryptocurrency. Nonetheless, the two categories of digital assets are very different. Cryptocurrencies are fungible, meaning that units of the same cryptocurrencies are identical and people can interchange them. For example, two units of bitcoin are interchangeable.

In contrast, this is not the same with NFTs. A single NFT is completely unique; therefore, people cannot interchange them. Usually, each NFT shows ownership of an object such as a house, artwork or music.

Here are a few facts to help you understand what an NFT is:

• Every NFT has each own unique identifier.
• Each NFT has an owner and which people can verify on the blockchain.
• Currently people create, purchase and sell them on the ethereum blockchain.
• The creator of every NFT can therefore, prove his/her ownership of it.

Characteristics of NFTs

More importantly, the easiest way to understand NFTs is to study their characteristics.

Uniqueness: Two NFTs are completely unique or different. There can never be 2 or more NFTs which are identical. That is why people say that NFTs are rare digital assets.

Indivisible: We cannot divide NFTs as we do with cryptocurrencies. With cryptocurrencies we can send a fraction of a unit, such as 0.6 BTC. On the contrary people can only sell complete NFTs.  

Ownership: An NFT represents an ownership of an object or snapshot of a moment.  

Uses of NFTs

There are different types of NFTs, based on their functions.

Gaming: NFTs are used to show ownership of some in-game assets, such as weapons as well as fuel. If the game item you buy is tokenised, it means that you can recoup the money you used to purchase it, if you no longer need the tool.

Digital content: Artists can tokenise their work thereby showing ownership of it and act as intellectual property. For instance, musicians can tokenise their music or videos and protect them from copyright infringement.

Real estate: People can also tokenise their real estate such as houses and use the NFTs to prove ownership of the real world assets.

Conclusion

In a nutshell, NFTs are digital assets, like cryptocurrencies, which represent some physical objects or cameos. People can buy and sell NFTs, whose values can change from time to time.